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Exam 8: Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

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Question 31

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Martha has both long-term and short-term 2019 capital gains and losses.The result of netting these gains and losses is a net long-term capital loss.Martha has no qualified dividend income.Also, her 2019 taxable income puts her in the 24% tax bracket.Which of the following is correct?

A) Martha will use Parts I, II, and III of 2019 Form 1040 Schedule D.
B) Martha will not benefit from the special treatment for long-term capital gains.
C) Martha will have a capital loss deduction.
D) All of these.
E) None of these.

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Question 32

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Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

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Question 33

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Willie is the owner of vacant land that he purchased in 2015 for $1,400,000 and held for investment.On January 22, 2018, he was paid $145,000 for a 13-month option on the land by Susan.She could buy the land for an additional $1,200,000 by exercising the option.Susan had hoped to build a luxury home on the land but was unable to get approval to build a big enough home to satisfy her needs.Consequently, Susan did not exercise her option, which expired on February 22, 2019.(1) What is Willie's basis, gain or loss, and type of gain or loss from these events? (2) What is Susan's basis, gain or loss, and type of gain or loss from these events?

When a patent is transferred, the most common forms of payment received by the transferor are a lump sum and/or a periodic payment.

A worthless security had a holding period of six months when it became worthless on December 10, 2018.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?

Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers, rights, and a continuing interest.Gold (the franchisee) makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Which of the following events could result in § 1250 depreciation recapture?

A net § 1231 loss is treated as an ordinary loss.

Short-term capital gain is eligible for a special tax rate only when it exceeds long-term capital gain.

Which of the following assets held by a manufacturing business is a § 1231 asset?

Involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are reinvested.

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.

An individual taxpayer received a valuable painting from his uncle, a famous artist who painted it.After the taxpayer held the painting for two years, he sold it for a $400,000 gain.The gain is a long-term capital gain.

Sara is filing as head of household and has 2018 taxable income of $57,000, which includes $3,000 of net long-tem capital gain.The net long-term capital gain is made up of $1,000 25% gain and $2,000 0%/15%/20% gain.What is the tax on her taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.

Sharon has the following results of netting her short-term and long-term capital gains and losses for 2019: $56,000 short-term capital loss and $82,000 net long-term capital gain ($21,000 0%/15%/20% long-term capital gain and $61,000 25% long-term capital gain). a.What is her net capital gain or loss for 2019? b.If there is a net capital loss, how much and what type of the loss carries over to 2020? c.If there is a net long-term capital gain, what is it made up of?

Assume that a building is subject to § 1250 depreciation recapture because bonus depreciation [§ 168(k) ] was used. The building is destroyed in a hurricane, which is the taxpayer's only casualty or theft for the year.In which of the following situations could there be a § 1250 depreciation recapture gain?

Section 1250 depreciation recapture will apply when accelerated depreciation was used on property employed outside the United States and that is sold at a gain.

Verway, Inc., has a 2019 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2017.For 2019, Verway's net § 1231 gain is treated as:

Lease cancellation payments received by a lessor are always ordinary income because they are considered to be in lieu of rental payments.

The maximum amount of the unrecaptured § 1250 gain (25% gain) is the depreciation taken on real property sold at a recognized gain.